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       Article

Review of financial market development in countries and the world crisis

Preface

Should distinguish between two concepts of economic growth and economic development . Economic growth is a quantitative concept, where economic development is a qualitative one. Various resources of economic growth are increase in implementation of capital increase or labor, increase of economic efficiency increase of productivity of production factors, and implementation of probable empty capacities in economy and economic development is growth  accompanied by increasing production capacities either physical, human, or social capacities. Just in case In economic development, quantitative economic growth are obtained, but besides social institutions are evolved, insights are changed, exploitation potential from available resources is increased continuously and dynamically, and new innovations are introduced every day. Besides one can say that combination of production and relative share of capital increase changes in production process .Development is a comprehensive matter in the society, so that it cannot occur in a single sector of it. Development has not any particular limit, boundary, and roof, but since it depends on human, it is a qualitative (contrary to economic growth which is exactly   quantitative) phenomenon which has not any limit. 

Meaning of financial markets in terms of economic development

Drawing plan of economic flowering through extending trans boundary relationships in this field and having generative relations with organizations such as WTO and Davous meeting in near futures depends on our present attempts for cautionary from existing relationships. Our most important consequence can be that the obtained teachings in such a particular conditions be our supplies and capital of future path.

But if it is to prevent from falling into another debt crisis, part or perhaps a large part of the money should be allocated to the financial aids. In the past, aids were accompanied with all sides conditions which part of it executed monetary and financial contractional policies- exactly contrary to what we now require- and imposed financial regulation-clearing and releasing, which were of the main causes of the crisis. 

In many of the world areas, because of some clear reasons, uniting with the International Money Fund has been accompanied with great disgrace which not only loan-takers but also loan-holders are not satisfied with it. Today, resources of cash funds exist in Asia and Middle East, but the question is that why these countries should put their money in organizations in which their right of vote is limited, and often impose policies which are contrary to their values and beliefs.

In the meeting of G20 leaders in November 2008, supporting-orientation was condemned and these countries made a commitment not to engage into such a policy. Unfortunately, the case study of the World Bank shows that 17 out of 20 mentioned countries in practice took action in new supportive-oriented, which the most important of them were the US, who has put the requirement of "purchasing US commodities" in their economic motive pack. But it is a long time that has been verified that subsidies can be as destructive as customs tariffs – and even more unjust than that, because the wealth countries can benefit from it better. If there has been a field of a constant race in the world economy, nowadays there is not such a game; perhaps subsidies and monetary aids of the US have changed everything as irreversible.

Banking systems in Islamic countries

Malaysia                                                                                                                           In Malaysia Banking Systems, this matter has attracted the people so much that the people's depository in Malaysian Islamic Banking System has reached from 70 milliard ringuit in 2004 to 83 milliard ringuit at the end of the year 2005. According to the annual report of Malaysian Central Bank, for the time being the value of people's deposits in Islamic Banking System has reached to the record of 1.12% of the total internal depositories of the Malaysian Banking System. Meanwhile, the paid loans from Islamic Banking System in the same time have increased by 4.67 milliard ringuit which is equal to 12%. Malaysian Central Bank has aimed reaching to standard limit of 20% by the end of 2010. Therefore, the foreign banks had showed a great tendency for representing Islamic Banking services in this country. Over than 800 experts and bank managers have participated in this seminar.

Indonesia                                                                                                                      The Indonesian governing category as knowledgeable individuals class through the world are fearing encountering with the danger of another bank crisis. Following it the government guarantees bank deposits of over than 210000$. In the previous law this figure was 10000$. This program was just an example (see the attached chart). After the 1997-98 crisis the deposit guarantee law for preventing from future crisis was compiled. But Indonesia is now potentially encountering a new crisis, and the authorities have reacted by increasing deposits guarantee top. The deposits guarantee level has been increased 21 times, but the crisis is still waiting in ambush.

Developing countries and the world crisis:

       Probably this year after the World War II is the worst year for world economy, as the World Bank anticipates a decrease of up to 2 percent. Even the developing countries which perform all the jobs right and on time- and have relatively better macro economies and setting policies comparing to the US- are experiencing crisis pressure. China, primarily because of its hasty decrease in export, probably continues its growth with a speed much less than its yearly rate of growth of 11-12 percent in recent years. The recent crisis will make poor almost 200 million people, unless a special work is done This global crisis requires a global answer, but unfortunately, the responsibility of answering remains on the national level. Each of the countries tries to represent its economic motive package for increasing effects on its citizens, but not on the global level. In the measurement of motive sizes, the countries measure the cost of inspecting to their budgets with the profits obtained based on growth and employment increase obtained in that way in their economy. Since some of the profits (mainly about small and open economies)belongs to others, the packages of economic motives probably smaller than what it may be otherwise, have been designed. The same thing shows why we require a pack of economic motive harmonious in the global level. In many of the world areas, because of some clear reasons, uniting with the International Money Fund has been accompanied with great disgrace which not only loan-takers but also loan-holders are not satisfied with it. Today, resources of cash funds exist in Asia and Middle East, but the question is that why these countries should put their money in organizations in which their right of vote is limited, and often impose policies which are contrary to their values and beliefs. Eventually it seems that many of the improvements suggested in the field of leading International Money Fund and Global Bank, - are obviously affected by this fact that how the chiefs of these institutions have been Selected – are under consideration. But the process of improvement is moving very slowly, and the crisis will not wait for us. Therefore, it is necessary that the monetary aids; beside, or instead of, being solely by International Money Fund, to be from different ways, including area organizations. It is possible to create new loan-giving facilities accompanied by leading structures which are more homogenous with 21st century. If it would be possible to quickly make it operational, (where I believe we can) such facilities are the best way for paying the money.

 In the meeting of G20 leaders in November 2008, supporting-orientation was condemned and these countries made a commitment not to engage into such a policy. Unfortunately, the case study of the World Bank shows that 17 out of 20 mentioned countries in practice took action in new supportive-oriented, which the most important of them were the US, who has put the requirement of "purchasing US commodities" in their economic motive pack. But it is a long time that has been verified that subsidies can be as destructive as customs tariffs – and even more unjust than that, because the wealth countries can benefit from it better. If there has been a field of a constant race in the world economy, nowadays there is not such a game; perhaps subsidies and monetary aids of the US have changed everything as irreversible. In fact, even commercial organizations in advanced industrial countries which do not receive subsidies are benefittin from unjust advantages. These organizations knowing that in case of a bankruptcy there will be somewhere supporting them as monetary aids; can accept risks that the others cannot afford accepting it. Besides it is possible to understand internal political requirements which results in monetary and subsidiary warrantees, the developed countries should recognize its world consequences, or represent compensative aids to developing countries.

One of the important medium-term innovation which was emphasized by the United Nations Commission, was the coordination committee of world economy, which not only coordinates economic policies, but also is engaged in evaluating impending problems and essential gaps. The deeper the economic stillness becomes, probably the more various countries are face to face of bankruptcy. But we still do not have a capable frame for behaving with such problems.

Source specifications:

1-Developing Countries and the Global Crisis(by Joseph E. Stiglitz), Journal of Turkish Weekly (JTW), 16 April 2009

  2- Dr. Mostafa Salimifar, development economy, Movahed pub.2003

 3-Dr. Mahmood Motevasseli, economic development, study and compilation org. of human sciences books of universities (SAMT), 2003 

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http://www.armef.com/pdfs/Ahmad_Reza_Hedayati_Dezfulli1.pdf 

+ نوشته شده در  چهارشنبه 6 مرداد1389ساعت 22:31  توسط احمدرضا هدایتی دزفولی  | 

Article

Review the principles of Islamic of financial system and different theories about financial market development

         Theories

1-    Theory of Adam Smith (1723-1790): According to Smith and other classic economists (such as Ricardo and Maltos), earth, work, and capital were production factors. Invisible hand, division of labor accumulation of capital, and market expansion concepts form the skeleton of his theory in economic development.

2-    Maltos theory (1766-1823):  He fame is more related to his population theory, whereas he has precise ideas about economic matters, including market saturation and economic crisis.

3-    Ricardo theory (1772-1823): His two famous theories are the Law of Descending return and Relative Advantage.

4-    Classic growth model: From their point of view, the development of capitalistic economies was a race between technology advancement and population growth, in which, for some time, technology advancement was on the top but some day it will be finished or will experience downturn and the economy will follow a downward trend.

5-    Carl Marks Theory (1818-1883): He believed that the value added of the production is solely due to the work of workers stage (proltaria), whereas the capitalists allocate a nonapropriate share of income to themselves solely because of possession of production equipments.Marks realized cleverly that income distribution in capitalistic societies is too inequitable and unjust. 

6-    Mark's capitalistic economic growth model: In Mark's viewpoint, each production method, including first common, slavery and feudalism, capitalism, socialism and communism, has two major characteristics as production forces and production relations. Production forces are related to technical structure of production such as, the level and rate of technology change, production equipment, and natural resources whereas production relations are related to the special trends of human relationships in the course of production.

7-    Shaumpeter Theory (1870-1950): Josef Shaumpeter believed that capitalistic machine is not only able to generate high economic growth rates, but also can compensate its social detriments. He begins his analysis in this form that an economy is set in a static equilibrium, and its characteristic is having a cyclical course which is repeated for ever. In this economic system every agency is set in an exact competitive equilibrium whose costs are exactly equivalent to its incomes and profit is equal to zero. There is no opportunity for profit gaining and the families too are in such a situation like the agency.

8-    Loeise-Fay-Ranis (L-F-R) model of development: The first and most famous model of development which at least implicitly considered the immigration process from villages to cities is Arthor Loeise's model (1954) which was then formulated and developed by John Fay and Goustave Ranis (1961). The model was known as the general theory of development process of surplus labor of third world nations in 1950 and 1960 decades. Economic development intellectuals and knowledgeables considered the situation of world's different countries from the viewpoint of economic development or undevelopment and searched in this field. In the background of main roots and causes of development process in different countries of the world, these opinions and approaches were represented.

          The principles of Islamic financial system are as follows:

a)    Illegality of usury: When money is exchanged between two persons, no one of the two sides should not claim any benefit, without any creation of increased value, so exchanging money with money (if the units are identical) is according to the religious law and legal when it is performed without any additional money. In Islamic Law, the income is valid when it is obtained from work, transaction, inheritance, grant or gift. The guaranteed benefit of the money loaned, shows unexcused creation of financial right, and this right, since being outside field of Islamic permitted and allowable limit, is not adapted to the religious law. In usury system the practical operation of money is not important. In such a system, if use of money in company or industry leads to loss, the constant benefit should be paid, and this is not religious law.

b)   Sharing profit and loss: Since receiving usury is forbidden, suppliers of capital are considered capitalists, therefore entrepreneur and capitalist want to share profit, they should share also commercial risk. Sharing profit and loss, results in eliminating usury borrowing. In sharing system, financial resources are properly allocated by the partners, whereas in usury system, the loaner does not consider to the manner resources are allocated and wants just a constant benefit.

c)    Money as potential capital: Money is a tool for exchange which measures the value of things. In  doubtless Islam religion, money is originated from its credit, that is, when money is combined with work based on Islamic contracts and changed as actual capital, then allocates profit efficiency for the capitalist

d)   Some of the bourse actions forbidden: Islam is a religion which emphasizes on completely performing the obligations.

e)    Performing obligations: Forbidden unlawful activities: Some of the activities in Islam are part of unlawful businesses and some others are legitimate and approved by doubtless Islam religion, whereas the institutions should participate in those activities which are allowed by Islam, besides the institutions should not perform an action which is opposed to the fundamentals of doubtless Islam religion.

Result                                                                                                     All the principles of Islamic and personalities theories emphasis to three factors humans, capital, works but to be done different circumstances. The principles of Islamic is on the basis the God order.

Source specifications:

  1-  Dr. Mostafa Salimifar, development economy, Movahed pub.2003

 2- Dr. Mahmood Motevasseli, economic development, study and compilation org. of human sciences books of universities (SAMT), 2003 

 3- Giddens, A. (1984) ,The Constitution of Society, Cambridge: Polity Press

 

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 http://www.armef.com/pdfs/Ahmad%20Reza_Hedayati%20Dezfulli.pdf

+ نوشته شده در  چهارشنبه 6 مرداد1389ساعت 22:8  توسط احمدرضا هدایتی دزفولی  |